Change to UK Deficit Plan Could Hurt Rating: Fitch
The U.K. faces a risk to its current triple-A rating, if the government steers away from its planned austerity drive, David Riley, Head of Global Sovereign Ratings at Fitch Ratings has told CNBC.
“I think throwing out plan A, without a credible plan to bring down what is still a very large deficit, that is still rising in the U.K. at a very rapid rate, does pose some risk,” he told CNBC Tuesday.
“We think there is actually limited room for maneuver for the British government to do some kind of stimulus measures to try to get the economy going,” he said.
Riley said the U.K. economywasn’t growing because it was going through the aftermath of the financial crisis and the credit bubble. He said a lack of infrastructure wasn’t holding back growth, though he added that spending on infrastructure wouldn’t necessarily be viewed negatively by ratings agencies and bond markets.
Riley concluded that policy makers in the U.K. and ratings agencies have to look at national economies from different viewpoints.
“What might be the best growth-oriented policy response may not necessarily be compatible with the U.K. or other countries retaining their triple-A status,” he said.
“And it’s not the end of the world if they lose their triple-A [rating], as we’ve seen elsewhere.”